The franchisee successfully appeals for error as a result of the forecast provided by the franchisor
Court of Utrecht
The court in Utrecht recently ruled in favor of a franchisee who argued during the court case that his franchisor had provided him with inadequate operating forecasts when entering into the franchise agreement. According to these forecasts, the franchisee could realize an acceptable turnover. The opposite turned out to be true – the franchisee achieved virtually no turnover. Nevertheless, after the early termination of the franchise agreement, the franchisor claims payment of (missed) fees from this franchisee and institutes legal proceedings.
However, the franchisee invokes error in the lawsuit; had he known how the proverbial ‘fork’ would really be ‘in the stem’, he would not have concluded the franchise agreement with the franchisor. The court accepts the defense and points out – among other things – that there is such a big difference between what the franchisor has forecast and what the franchisee has achieved in terms of turnover. Nor is it disputed by the franchisor that other franchisees also fail to meet the forecasts provided. The franchisor also apparently used historical data, even though this data dates from before the credit crisis. All this is reason for the court to assume that the forecasts provided by the franchisor are not sound.
The previous ruling ‘fits in’ completely with the line that the Supreme Court set almost 10 years ago and which has already been discussed several times in these articles. A franchisee must be able to rely on the accuracy of the forecasts provided to him by a franchisor. It obliges the franchisor to provide information based on sound grounds. Since the franchisee’s decision whether or not to participate in a particular franchise formula will largely depend on the return that can be achieved from the operation, this is without doubt justified.
Mr JH Kolenbrander – Franchise lawyer
Ludwig & Van Dam Franchise attorneys, franchise legal advice Would you like to respond? Mail to coalbrander@ludwigvandam.nl
Other messages
Judge: Protect franchisee against supermarket organization (Coop) as lessor
Does the franchisee need legal protection from supermarket franchisor Coop? The District Court of Rotterdam ruled on 9 February 2018, ECLI:NL:RBROT:2018:1151, that this is the case.
Acquisition fraud vs. error in franchise forecasting
Who has to prove that the franchisor's forecast is unsound? In principle, this is the franchisee. If the franchisee invokes the Acquisition Fraud Act, it may be that
Obligation to sell back at the end of the franchise agreement
Franchise agreements sometimes provide that the franchisee is required to sell back purchased assets at the end of the franchise agreement.
Supermarket letter – 20
Uncertain legal position of Emté franchisees
Position of franchisees in franchisor restructuring
Franchisees must be adequately and generously informed in advance by the franchisor about the content and consequences of (further) agreements...
Interview Franchise+ – mrs. J. Sterk and AW Dolphijn – “Reversal of burden of proof in forecasts approved by court” – February 2018
The new Acquisition Fraud Act indeed appears to be relevant for the franchise industry, according to this article from Franchise+. Alex Dolphijn of Ludwig & Van Dam assists a franchisee in a